Planning a single retirement?
A 2017 report found that about 52% of people aged between 25 and 64 can expect a ‘comfortable retirement’. On the flip side
that leaves over 47% of us (or 5.1 million people) unlikely to have enough put aside to live comfortably in our retirement years.
However, the story it tells for single people is even more disturbing with claims that only 22% of single women and 31% of single men can expect a comfortable retirement.
What is ‘comfortable’?
In 2017 the superannuation balance required for a comfortable retirement was estimated at $640,000 for a couple and $545,000 for singles. This figure assumes the retiree(s) will draw down all their capital and receive a partial age pension.
Based on 2016 figures the average superannuation balance for a woman at retirement is $231,000. For men it is $454,000 – still significantly short of the required threshold. You can see why singles, particularly women, may find retirement more financially challenging than others!
Is the age pension important?
The answer? VERY. Without it, only 20% of couples, 17% of single males and 9% of single females could afford a comfortable retirement. As our policy makers struggle with the costs of supporting both present and future ageing populations, what will happen to the age pension? A heavy reliance on the pension may be to your disadvantage.
Of course prior to compulsory super guarantee contributions, people expected that retirement meant living on the pension. So what has changed?
We are:
• Living longer – with women on average living longer than men.
• Healthier and therefore more active.
Longevity and good health have created a ‘new vision’ of our retirement lifestyles.
Retirement ‘risk’ factors…
Lower super balances are certainly a risk for single women. The imbalance between women and men is usually due to factors such as lower incomes, time out of the workforce caring for families and part time work.
Renters will need more retirement savings to cover the cost of rent. A female retiree may also be paying rent for longer.
Divorce after 50. Divorce at any age can set you back financially but the older you are the less time you have to replace what was lost in the division of assets. This can significantly impact a previously well planned retirement.
Financial goals
If you’re building your retirement nest egg on a single income and making financial decisions solo the following tips may help:
• Become financially confident. Educate yourself about finances. Know what assets and liabilities you have and plan for your future goals. Having goals helps you make better financial decisions.
• Manage your debt. Spiralling debt can derail your financial goals. If debt becomes a problem take action to get back on track sooner rather than later. Don’t be embarrassed – ask us how!
• Learn about investing. You don’t need a lot of money to invest. Consider starting small and add to your investments over time.
• Boost your super. Consider making extra super contributions such as salary sacrifice. Seek advice from your accountant and financial planner first.
Think you are too young to worry?
You may think you don’t need to worry yet. However with advances in medical technology it is predicted younger
generations will live even longer than baby boomers.
They should also have the benefit of a lifetime of super contributions to boost retirement balances. But did you know the
Australian government recently passed a law that will delay the introduction of the 12% super guarantee until July 20254? That’s 7 years later than the date set out in previous laws! Who knows if it will change again?
Planning is the key
Whether you are a couple, single, male or female the question is: will your super balance be enough in retirement? If the current generation is any guide – probably not.
